· C ratings – likelihood of meeting insurance obligations varies greatly and consumers may experience great difficulty claiming a policy; may be under supervision; vulnerable to liquidation

· D ratings – company has been placed under an order of liquidation

Because there are differences in how the four services rate insurance companies, be careful in drawing conclusions regarding the financial structure and soundness of a company.

Insurance companies classified into the top three rating classes only differ a little, as these companies provide an exceptional experience for their customers.

If there has been a material change in a company’s circumstances that rating agencies have yet to review, the company will be placed on a watch list. The published notice of this watch list action will usually indicate whether there are positive, negative, or developing expectations.

The rating process for S&P, Moody’s and Fitch are all relatively similar, as they typically follow the same distinct steps that are explained below.

1) A typical rating process starts with an advance review by rating agency analysts of statutory and financial statements from years past as well as other relevant information.

2) The next step involves a meeting of analysts from the rating agency with the company’s senior officials and managers will be scheduled. The company’s chief executive officers as well as any company officials responsible for the business area that will be most affected by the final rating should be present.

3) A review by a committee of experienced insurance analysts of the material and observations will gather together to determine a tentative rating, which will be presented to the company. If the company believes the rating is not an accurate representation, they can request an additional review.

4) The final step involves publishing the official final rating along with suitable explanations, once it has been established by the rating agency.

There are slight variations in this general process among the three multi-industry rating services, and there could even be variations depending on the rated company’s circumstances.

Companies seeking ratings for the first-time usually have the option of withdrawing a rating if they do not fully agree. For companies that have been around for a longer time, this is almost never an option.

Furthermore, the A.M. Best process includes the same elements but the order of the steps is different as they release their findings in the spring of each year. They also do not require visits with company officials each year.